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TMI Blog2016 (12) TMI 1646X X X X Extracts X X X X X X X X Extracts X X X X ..... t). We have held in earlier parts of this order that the assessment order under consideration was passed in undue haste, thereby making it rightly eligible for revision by the CIT u/s 263 of the Act. In view of the foregoing discussion, we are satisfied that the ld. CIT was right in setting aside the assessment order and directing the AO to make a fresh assessment. The impugned order is, therefore, countenanced. Genuineness of agricultural income. - A.Y. 2011-12 - Agricultural produce was not proved; transportation of the same to UAA was also not proved; bills issued by UAA were not genuine; cash received from UAA shown at ₹ 1.00 crore did not appear in their books of account; the expenses claimed were not backed by any vouchers/bills; and all the expenses were claimed to have been incurred on one single day and that too in cash. We fail to comprehend as to how the assessment order accepting the genuineness of carrying out the agricultural operations and earning a huge income in such circumstances can be considered as an order made after proper inquiry as has been canvassed by the assessee. It is a case of a patent non-application of mind by the AO to the facts, which were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s completed in a routine and casual manner without making any effective inquiry. Notice u/s 263 was issued. After entertaining objections and replies from the assessee, the ld. CIT came to hold that the Assessing officer passed an erroneous order prejudicial to the interests of the Revenue, inter alia, on the ground that the revision of return was wrongly accepted; accounting principles were wrongly considered and accepted inasmuch as the agricultural income was not declared on the basis of mercantile system of accounting, being, the method followed by the assessee; directions issued by the Addl. CIT u/s 144A of the Act were not fully complied with; no requisite inquiry was conducted; and the genuineness of the declared agricultural income was not examined by the AO. The ld. CIT summarised his view justifying the exercise of revisionary power u/s 263, as under :- i. After the case was selected for scrutiny vide notice u/s 143(2) dated 24.08.2011, the assessee filed his revised return on 02.03.2012 at an enhanced agriculture income of ₹ 2.80 crores against ₹ 15 Lakh shown in the original return to cover up the huge investment of ₹ 2.65 crores made in LIC polici ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome with the help of genuine bills, vouchers, documents, books of accounts and their authenticity. The assessee cannot save himself by simply stating that records were maintained by his agent/manager. viii. A.O. has not applied his own mind but blindly accepted the findings of ITO, Ward-1, Shimla in the case of Mr. Anand Chauhan, in relation to agriculture income declared by the assessee. A.O. had to make his own enquiry in respect of agricultural income, because agricultural income was declared by assessee himself, not by Mr Anand Chauhan, who was assessed with ITO, Ward-1, Shimla. ix. A.O. has not complied with the directions given by the Addl. CIT, Shimla Range, Shimla u/s 144A specifically regarding details of income and expenditure account, agriculture income of the assessee in the immediate preceding and succeeding years. A.O. has simply obtained the month wise expenditure account which was not supported by any Muster roll, bills/vouchers or any documentary evidences of expenses. Regarding quantum of income of preceding and succeeding years, A.O. has simply accepted the reply of the assessee that the quantum of crops of a particular year depends upon the climatic condit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bjection was raised by the ld. AR on the strength of the definition of the term Record given in Explanation 1(b) to Section 263(1) of the Act. The ld. AR also relied on the judgment in CIT vs. Max India Ltd. (2007) 295 ITR 282 (SC) to bolster this submission. This was vehemently opposed by the ld. DR. 5.2. Since this is a preliminary objection raised by the ld. AR, we deem it useful to first deal with the same. The contention is primarily founded on the definition of the term Record given in Explanation 1(b) to Section 263(1), which provides that : ` record shall include and shall be deemed always to have included all records relating to any proceeding under this Act available at the time of examination by the Principal Commissioner or Commissioner . The Explanation containing this definition has been appended to section 263, which section deals with the revision of orders prejudicial to the Revenue. Sub-section (1) of this section provides that the : `The Principal Commissioner or Commissioner may call for and examine the record of any proceeding under this Act, and if he considers that any order passed therein by the Assessing Officer is erroneous in so far as it is preju ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Appellate tribunal . It has no relation with the right of the parties to rely on evidence during the appellate proceedings before the tribunal and such right to file additional evidence is not circumvented by this provision. 5.4. The reliance of the ld. AR on the case of Max India (supra) is misplaced. In that case, the AO interpreted the word `profits in section 80HHC in assessee s favour by relying on certain judicial decisions. The CIT revised the order interpreting the word `profits in section 80HHC in favour of the Revenue. After the passing of the revisionary order, the law was amended retrospectively in favour of the Revenue. When the Department tried to rely on the retrospective amendment, the Hon ble Court held that the view taken by the AO was a possible view and hence the same could not have been disturbed in the exercise of power u/s 263 because : ` Different views existed on the day when the CIT passed the above order . The later amendment was ignored because at the time of the passing of the revisionary order, the issue was debatable. Material later coming into existence, diametrically opposite to the legally possible view taken by the AO at the time of passing t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le view. In both the cases, the issue was debatable at the time of passing the orders by the AO as well as CIT. Whereas in Max India (supra), there came a later retrospective amendment upsetting the view of the AO, in G. M Mittal (supra), the AO s view was frustrated by a later judgment of the Hon ble Apex Court. In both the cases, the Hon ble Summit Court held that since the issue was debatable and the AO took one possible view based on the judgment of some High Court, the assessment order could not be revised due to later developments. 5.7. In the extant case, it will be seen infra that there is no debatable issue decided by the AO taking one possible view and the additional evidence, sought to be relied by the ld. DR, does not disturb such possible view of the AO or supports the contrary view of the CIT. Here is a case of non-application of mind by the AO and the ld. CIT setting aside the assessment order to be passed afresh as per law and in the light of the observations made in the impugned order. The additional evidence simply supports the finding of the CIT that the AO did not conduct inquiry. In view of the foregoing discussion, the contention of the ld. AR that the Depa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Tribunal, for reasons to be recorded, may allow such document to be produced or witness to be examined or affidavit to be filed or may allow such evidence to be adduced. A bare perusal of the Rule exposes that the parties are not entitled to produce additional evidence before the Tribunal. The same can be filed if the Tribunal, inter alia, requires to enable it to pass orders . We are not concerned with other parts of the Rule 29. The contention raised by the ld. AR that the Department has no right to file additional evidence under Rule 29 is partly correct in the sense that no right vests in any party to press for the admission of additional evidence before the Tribunal. It is the prerogative of the Tribunal to entertain additional evidence for enabling it to pass order etc. 6.3. The ld. DR has filed all the evidence, including additional evidence, in a common paper book. Albeit, no written application was technically filed for acceptance of additional evidence under rule 29, which ought to have been, yet the ld. DR orally prayed that such additional evidence be admitted. It goes without saying that an oral request can also be validly made. We, therefore, treat such an oral ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , is, ergo, admitted. iii. Whether any separate order is required before admitting additional evidence. 7.1. The ld. AR pressed into service the judgment in Maruti Udyog Ltd. vs. ITAT Ors. (2000) 244 ITR 303 (Del) to contend that if the tribunal was inclined to accept the additional evidence, then, it must first pass a separate order indicating the reasons for acceptance of such additional evidence and only then it can proceed with the matter on merits. 7.2. We fail to comprehend how this judgment supports the assessee s view point of passing a separate order for admission of additional evidence. The Hon ble High Court in that case was dealing with the admission of additional ground in terms of rule 11 of the ITAT Rules, 1963. It was on appreciation of the relevant legal position that the Hon ble High Court held that while admitting additional ground of appeal, Tribunal is required to indicate the reasons first and then take up the appeal for final disposal. In the oppugnation, we are dealing with the admission of additional evidence, which is governed by rule 29 of the ITAT Rules. There is an underlying difference between the two provisions in terms of their ambit an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n resorted to the second course of action, being disclosure of income on year to year basis. He submitted that both the courses have the legal backing and hence the ld. CIT himself erred in dislodging the mercantile system of accounting rightly followed by the assessee at the time of filing the original return of income. This was strongly opposed by the ld. DR. 9.3. It has been noticed above that the assessee filed its original return declaring, inter alia, agriculture income amounting to ₹ 15.00 lac. Notice dated 24.8.2011 u/s 143(2) for scrutiny assessment was served on the assessee. A revised return was filed on 2.3.2012 declaring agricultural income of ₹ 2,80,92,500/- without altering the taxable income as declared in the original return. In support of such enhanced agricultural income shown in the revised return, the assessee contended before the Assessing officer during the course of assessment proceedings that it had entered into Memorandum of Understanding (hereinafter also called `the MOU ) dated 15th June, 2008 with one Shri Anand Chauhan for managing its apple orchard measuring 105 bighas known as Shrikhand Orchards, situated at village Damrali, Chak Shyar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom selling the apples, to invest the proceeds so obtained from the sale of apples in Government securities, Mutual Funds, in schemes of LIC or to invest the money in the products of Scheduled Banks by ensuring the safe better returns. 9.5. Clause 5 of the MOU, which is also relevant for our purpose, reads as under:- That the commission hereby agreed to be paid shall be paid @ 2% on the net sale proceeds after deducting all other expenses spent upon the management of the orchard and shall be payable after a period of 3 years by the First Party to the Second Party at the time of settlement of accounts on the completion of the period of this MOU. 9.6. Clause (6) of the MOU provides that Shri Anand Chauhan shall maintain accounts of incurring expenses pertaining to the management of the orchard and shall maintain accounts of the net proceeds. The assessee made out a case before the Assessing officer, as has been contended before us as well, that the agricultural income from such orchard came to be known to it on settling the account with Shri Anand Chauhan in September, 2011 and that was the reason for revising the return on 2.3.2012 which was a bona fide and genuine rea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Sh. Chauhan earned income during the three years on his own behalf and the income accrued to the assessee only at the end of the third year. The contention, if given a logical conclusion, will have the effect of obliterating the relationship between an agent and a principal, which is an absurd proposition. Thus, it follows that the income so accrued in the financial year itself, was required to be shown while filing the original return. Its accrual cannot be claimed to have been deferred to a later stage when settlement of account was made with his agent in September, 2011. We find that not only the sale of crop was shown to have been made but even the sale proceeds were also realized during the financial year itself. This shows that the income not only accrued but was also received during the year. 9.9. Without prejudice to our above finding of accrual of income to the assessee at the end of the year because of its principal character, the least that the Assessing officer should have noticed was that as per clause 2 of the MOU, the agricultural income was to be invested on behalf of the assessee in Government securities/LIC policies. Such LIC policies were admittedly purchased ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the ambit of the term `discovered , so as enable the assessee to obtain the benefit of this provision. Thus it is apparent that the assessee s such plea of getting knowledge of the agricultural income on settlement of account with Sh. Anand Chauhan in September, 2011, does not fall within the pale of the word `discovers in section sub-section (5) of section 139. This fanciful explanation given before the AO which also came to be accepted, was neither bona fide nor genuine, which is a pre-requisite for revising a return of income. The AO, having full knowledge of the MOU and the declared other agricultural income in the return along with a mention of still some other agricultural income, should have kept his eyes open and not accepted the so-called bona fide of the assessee in filing the revised return, after the issue of notice for scrutiny assessment. 9.12. The ld. AR raised one more interesting argument that income of ₹ 2.65 crore was an agricultural income and hence it did not matter the year in which it was offered as the same was exempt from tax. This argument deserves the fate of dismissal at the very outset. The ld. CIT, as will be seen hereinafter, has given el ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me has been revised i.e. A.Y. 2008-09, 2012-13 while examining the genuineness of the revised agriculture income in the year 2010-11. 10.4. The Assessing officer partly complied with the directions of the Addl. CIT issued u/s 144A seeking certain information from the assessee. Vide reply dated 18.2.2013, the assessee reiterated its earlier submissions, which were accepted as such. It can be seen above that the Assessing officer was specifically directed to find out the detailed account of originally shown agricultural income of ₹ 15 lac with dates of receiving sale proceeds. When questioned, the assessee filed a copy of expenditure account in respect of Shrikhand Orchards, Sarahan, being managed by one Shri Narvir Janarta, from which such net agricultural income of ₹ 15.00 lac was claimed to have been earned and declared in the original return. Only the figures of month-wise expenses were given and the same were also not supported by any bills/vouchers. The Assessing officer took such statement on record without tallying the dates on which the agricultural income from Shri Narvir Janarta was received and the authenticity of such expenses, more specifically when there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essment of the assessee, admitted that his father has orchards spread over 80-85 bighas and income therefrom was between ₹ 15-20 lac. Such a huge difference in the agricultural income earned from the farm of Shri Anand Chauhan s family and Shrikhand Orchards, Damrali, should have instigated the Assessing officer to inquire the genuineness and extent of income shown by the assessee, more so, when the statement of Shri Chauhan was before him. Regrettably, the AO failed to do so and was swayed by the reply of the assessee. 10.8. At this juncture, it is pertinent to have a look at the relevant part of section 144A, which is as under :- ` A Joint Commissioner may, on his own motion or on a reference being made to him by the Assessing Officer or on the application of an assessee, call for and examine the record of any proceeding in which an assessment is pending and, if he considers that, having regard to the nature of the case or the amount involved or for any other reason, it is necessary or expedient so to do, he may issue such directions as he thinks fit for the guidance of the Assessing Officer to enable him to complete the assessment and such directions shall be binding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s to where the cash realised from UAA was kept which was obviously not deposited on several occasions for months together, Shri Chauhan stated that he was keeping the amount at his house only. When asked as to why such amount was not immediately invested in LIC policies as per the MOU, he stated that he was waiting for the appropriate time for making investment. On a further query as to when he was so concerned about the proper investment of the assessee s funds in LIC policies, etc., then why did he lose bank interest for so many months by retaining huge cash running into crores at his house, he reiterated his stand of waiting for appropriate time for making investment in LIC policies. At this stage, it is pertinent to note clause (2) of the MOU, as per which, Sh. Anand Chauhan was required to invest the proceeds so obtained from the sale of apples in Government securities, mutual funds, in schemes of LIC or to invest the money in the products of scheduled banks by ensuring the safe and better returns. It is clear from the MOU that Shri Anand Chauhan was not to keep cash at his house. Rather, he was obliged to invest the sale proceeds in LIC policies, etc. or alternately to depo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icultural income will culminate in the case of his assessee. The AO was found not to have noticed that the agricultural income shown prior to the period of agreement and after the agreement was very low and has increased manifolds in the revised return. He opined that: the Assessing Officer has failed to enquire into the following points:- 1) Capacity of the orchard to arrive at the quantum of apple produce. 2) He has not tried to calculate the actual yield of apple from the above orchard. 3) He has not enquired about the yield of other orchards adjoining to Shrikhand Orchard to arrive at the correct conclusion. 4) The variety of apple, total quantity and its prevalent market rate for different varieties were not brought on record. 5) Though the figure of sale amount being huge, he has not enquired into the reasons for which the entire crop was sold in cash. 6) The AO has not enquired about the time period in which the apple crop is ripe and taken to market. 7) The mode of transport by which the apple crops taken to the market and its freight paid 8) Actual expenditure on fertilizers, pestisizers, spray etc. relating to agricultural income 9) He has no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r, the ld.CIT concluded that: the Assessing officer has not made the required and essential enquiries as warranted by the facts of the case regarding the agricultural income and source of investment in LIC policies. He has not applied his mind to check whether there can be any possibility or availability of such a huge agricultural income. The Assessing officer has failed to make proper enquiries in this case and has not applied his mind in the right perspective. This is the case where no relevant enquiries have been carried out. 12.5. The above references from the impugned order make it palpable that the ld.CIT, apart from holding the assessment order erroneous and prejudicial to the interests of the Revenue on the ground of invalid revised return and the AO not following directions u/s 144A etc., also held that the Assessing officer did not inquire into the genuineness of agricultural income declared by the assessee in the revised return. i. Evidence filed by the ld. AR 13.1. Firstly, we will deal with certain evidence placed by the ld. AR in the assessee s paper book to contend about the genuineness of agricultural income. The ld. AR invited our attention towards c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot paid any commission during the period of three years and he was to meet all the expenses of grading, packing, freight and pesticides, etc. either from his own resources or from sale of crop during the intervening period. 13.5. Page No.117 of the assessee s paper book is a copy of composite Profit Loss Account of M/s Shrikhand Orchards, Damrali, for the period 1.4.2008 to 31.3.2011. As against the gross apple receipts of ₹ 6.91 crore, the assessee has shown indirect expenses at ₹ 81.31 lac, including commission of ₹ 12.19 lac paid to Shri Anand Chauhan. This shows that the remaining expenditure of ₹ 69.12 lac were incurred by Sh. Chauhan during the period of three years from his own resources or from sale receipts. Nature of expenses, being, pesticides, fright and labour etc. decipher that these are ordinarily incurred before making sales. Profit Loss Account of M/s Shrikhand Orchards for the current year ending 31.3.2010 shows that total expenses of ₹ 35.24 lac were incurred including commission of ₹ 5.31 lac to Shri Chauhan. It means that roughly a sum of ₹ 30 lac was incurred on freight, labour, packing, pesticides, etc. by Shri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from the Bench about the source of incurring of expenditure in respect of Damrali Orchards, it was stated that a total sum of ₹ 4.60 lac was incurred in respect of both the orchards at Damrali and Sarahan, which position is contrary to what the assessee itself filed during the course of his assessment proceedings. The Assessing officer should have the courtesy to examine this aspect which had an important bearing on the determination of the quantum and genuineness of agricultural income. Once again, the AO failed on this count as well. 13.8. We also find that there is an apparent contradiction in the amount of commission stated to have been received by Shri Chauhan during the financial year 2008-09 at ₹ 2.50 lac and the amount of commission of ₹ 4,28,000/- shown in the Profit Loss Account of M/s Shrikhand Orchards, Damrali, whose copy is available on page 119 of the same paper book filed by the assessee. How there could be a difference in these two amounts was not examined by the AO and neither the ld. AR could throw any light on the same. 13.9. On an overview, it comes to the fore that the assessee claimed to have received a sum of ₹ 6.91 crore as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he proceedings in the case of the other. However, now we are confronted with a situation in which the entire proceedings in the case of Shri Anand Chauhan for the three years under consideration deal primarily and solely with the transactions carried out by him for and on behalf of the assessee. There is no shred of his separate and independent transactions which became the subject matter of revision u/s 263. We have noticed above that Shri Anand Chauhan allegedly carried out such transactions as an agent of the assessee. As the assessment orders and the subsequent revisionary orders in the case of Shri Anand Chauhan deal exclusively with the transactions conducted on behalf of the assessee, the findings recorded or the reliance placed by the ld. DR on the proceedings in his case, cannot be held as extraneous to the assessee s case. In fact, the proceedings in the hands of Sh. Anand Chauhan are shadow proceedings of the assessee and hence cannot be considered as separate and independent, so as to debar their consideration in the assessee s case. It is further pertinent to note that por una parte, the ld. AR is contending that Sh. Chauhan is a distinct assessee and no cognizance sho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have been used for transport of apples were provided by Shri Chunni Lal, representative of UAA. Examination of such details revealed that the vehicles, on verification, turned out to be oil tankers, scooters, motor cycle and Maruti 800 cars. Certain numbers as claimed to have been used for transport of assessee s apples were not even allotted by the RTO. It was further found during the inquiries for the assessment year 2011-12 in the assessee s own case that no entry of any of these vehicles was existing in the Government records, which fact was confirmed by the Subject Matter Specialist, Horticulture Department. It was further confirmed that no such vehicles even passed through the Apple Control Room, Fagu. The inquiries further confirmed that no such agricultural produce was ever transported from Rampur to Parvano. 15.5. The ld. DR also referred to the comparisons made by the AO of agricultural income with other prominent big apple growers for the assessment year under consideration. It was found that Shri Kanwar Uday Singh, Raj Bhawan Road, Woodvalle Palace, Chhota Shimla had shown net agricultural income of ₹ 16,24,960/- from the land of 237 bighas owned by him. Simila ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unni Lal on behalf of UAA claimed to have paid cash by 13 different firms across the country through him. Further inquiries were conducted from these 13 firms which divulged that either such firms were not existing/not traceable or they had not paid any amount. 15.8. In the light of the above submissions, the ld. DR contended that it was a case of fictitious sales of apple crop entered by the assessee through Shri Anand Chauhan and, hence, the entire amount recorded was his concealed income. 15.9. The ld. DR also referred to certain findings given by the Directorate of Enforcement. He submitted that the inquiry was conducted from Indian Security Press, Nasik with regard to the stamp papers used for signing the agreement dated 17.6.2008 with Shri Bishambar Das and Shri Ram Ashray Thakur, Manager of Shrikhand Orchards. The competent authority was specifically asked to provide the dates of printing and dispatch of the stamp papers with the serial numbers which were used for signing of the said agreement. The Indian Security Press, Nasik, intimated that the said stamp papers were dispatched on 24.9.2008 and 14.3.2009, respectively which was well after the alleged signing of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ls for the purposes of completion of assessment. He referred to page 13 of the paper book, which is a reply furnished by the assessee to the Assessing officer s notice. It was pointed out that the Assessing officer inquired about the increase in the agricultural income in the revised return and appropriate reply was given submitting various details as called for by him including a copy of the MOU dated 15.6.2008 with Shri Anand Chauhan. Referring to page 34 of the paper book, the ld. AR submitted that this was the reply given by the assessee in response to order sheet entry of the Assessing officer. It was stated that the Assessing officer sought directions from the Addl. CIT u/s 144A of the Act and also issued notice to Shri Anand Chauhan, whose copies are available on pages 38 and 39 of the Departmental paper book. Then, the ld. AR referred to the reply given by Shri Anand Chauhan furnishing the necessary details, whose copy is available on page 40 of the paper book. Directions were also issued by the Additional CIT u/s 144A, inter alia, requiring the Assessing officer to coordinate with the Assessing officer of Shri Anand Chauhan. The ld. AR submitted that the Assessing officer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rned by the family of Shri Anand Chauhan from their own separate orchard. The alleged sales to UAA also raised severe doubts coupled with the fact that there was no evidence of incurring expenses on transportation, packing and insecticides, etc. Apart from that, the entire arrangement with Shri Anand Chauhan, under which he was supposedly given an authority to manage Shrikhand Orchard, Damrali, in such a way that he remained in control of cash running into several crores in contradiction of the terms of the so-called MOU, also necessitated inquiry. All these factors were crying hoarse to conduct further inquiry and find out not only the extent, but also the genuineness of the claimed agricultural income of ₹ 2.65 crore. Even the directions given by the Addtl. CIT were not heeded to a greater extent. The above issues should have been the corner stone for the Assessing officer to embark on further inquiry to unearth the truth. Confronted with such peculiar and hair-raising circumstances, the Assessing officer should have got alerted and dug the matter deep for unearthing the reality of the transaction. Unfortunately, nothing of this sort was done by him which is a perfect examp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erence about conducting an `inquiry , in others, mere obtaining and placing the documents on record may not be equalized with conducting an inquiry. It depends upon the facts and circumstances of each case. Where the facts are just ordinary and prima facie there is nothing untoward the recorded transaction, the obtaining of the documents and the application of mind thereon, without a further outside inquiry, may mean that the AO did conduct inquiry, leaving the question open as to whether it was a proper or an improper enquiry. But, where the factual scenario of a case prima facie indicates abnormalities and cry for looking deep into it, then a mere collection of documents cannot be held as conducting inquiry, leave aside, adequate or inadequate. In such later cases, only when the AO, after collection of the initial documents, embarks upon the further detailed investigation, that we can say that he conducted inquiry. Where the facts of a particular transaction gravelly demonstrate about its non-genuineness and even a casual look at such facts, prima facie, divulges foul play, then the AO must make further examination. Collection and placement of papers on record in such a situation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... observed that the question of inadequate enquiry should be understood in its proper perspective and: if it can be shown that the inadequate enquiry led the AO or may have led into assumption of incorrect facts, that could make the order erroneous and prejudicial to the interests of the revenue. Setting a bad trend has also been held to be prejudicial to the Revenue. Similar view has been recently taken by the Hon ble Calcutta High Court in Rajmandir Estates P. Ltd. VS. Pr. CIT (2016) 386 ITR 162(Cal). 18.7. When we comparatively consider the instant case vis-a-vis Maithan International (supra), it can be seen that the facts under consideration are on a much weaker footing. In the present case, the AO obtained certain documents and got satisfied, whereas in the case of Maithen International (supra), an Inspector was also deputed to conduct a further inquiry in addition to the collection of documents etc. as has been done in the instant case. 18.8. Decision of the Hon ble Full Bench of the Guwahat High Court in the case of Jawahar Bhattacharjee reported in (2012) 341 ITR 434 (Gau.) (FB) is also an authority for the proposition that : not holding such enquiry as is normal an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee to explain as to why this amount of compensation/damages be not treated as income chargeable to tax under the head Income from other sources as against Exempt agricultural income claimed by the assessee and accepted by the Assessing officer. After considering the reply, the CIT set aside the assessment order. The Tribunal dismissed the assessee s appeal. When the matter finally came up for adjudication before the Hon'ble ble Supreme Court, their Lordships approved the revisionary order by holding that : an incorrect assumption of fact or an incorrect application of law will satisfy the requirement of the order being erroneous. In the same category fall orders passed without applying the principles of natural justice or .passed without application of mind. Their Lordships further held that the phrase prejudicial to the interests of the Revenue is of wide import. Thus, it is apparent that the non-application of mind by the Assessing officer validly brings an assessment order within the fold of section 263. This judgment supports the view of the ld. DR. 19.3. The reliance of the ld. AR on this judgment to contend that if two views are possible and the Asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ial as was there before him, which ex facie required thorough verification. So, this is a case of not taking a view at all and not that of taking a possible view on the matter. The Hon ble Supreme Court in the above case has held that where two views are possible and the ITO has taken one view with which the CIT does not agree, it cannot be treated as an erroneous order prejudicial to the interest of the Revenue `unless the view taken by the ITO is unsustainable in law . The instant case is covered under the exception as italicized, being the AO taking a view which is not sustainable in law. Turning to the facts, we find that the AO simply accepted the material available before him. No quasi judicial authority equipped with a sound mind could have formed a view as to the genuineness and the correctness of the extent of agricultural income declared by the assessee in the given circumstances without further investigation. Thus, it is wholly inapt to contend that the Assessing officer made proper inquiry and took a possible view in accepting the declared agricultural income as such. iii. CIT should have himself shown infirmity in the assessment order rather than sending the matter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssible thing to be done. It is axiomatic that the law does not require an impossible to be complied with. We are reminded of the legal maxim, `Lex neminem cogit ad vana seu impossiblia , which means that the law compels no one to do impossible things. When we approach the facts of the case under consideration, it becomes manifest that the extent of inquiry conducted by the AO, being as good as no inquiry, was sufficient in itself to empower the CIT for invoking his jurisdiction u/s 263 cancelling the assessment and directing a fresh assessment to be made. 20.3. Our view is further corroborated by the language of section 263, which gives plenary powers to the CIT by providing in sub-section (1) that the CIT may: pass such order as the circumstances justify including an order enhancing or modifying the assessment or cancelling the assessment and directing a fresh assessment. Though it is within the power of the CIT to modify the assessment as he considers expedient after making necessary inquiry, at the same time, he is equally empowered to cancel the assessment and direct a fresh assessment, of course, after pointing out that the Assessing officer failed to make an inquiry as w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T to have himself made enquiries before cancelling the assessment. Similar view has been taken by the Hon ble Supreme Court in the case of Rampyari Devi Saraogi vs. CIT (1968) 67 ITR 84 (SC) holding that an assessment made by the AO in undue haste without making any enquiry would render an assessment order erroneous and prejudicial to the interests of the revenue. Similar view has been reiterated by the Hon ble Apex Court in Smt. Tara Devi Aggarwal vs. CIT (1973) 88 ITR 323 (SC). We have held in earlier parts of this order that the assessment order under consideration was passed in undue haste, thereby making it rightly eligible for revision by the CIT u/s 263 of the Act. In view of the foregoing discussion, we are satisfied that the ld. CIT was right in setting aside the assessment order and directing the AO to make a fresh assessment. The impugned order is, therefore, countenanced. 21. In the result, the appeal is dismissed. ANAND CHAUHAN (A.Y. 2010-11) 22. Briefly stated, the facts of the case are that the assessee filed return declaring total income of ₹ 3,40,080/- which was processed u/s 143(1) of the Act. Perusal of the AIR information revealed that the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e crop sale was made in cash; actual yield of apple from the above orchard; and the time period in which apple crop ripens and is taken to the market. He further held that the Assessing officer accepted the claim of sale proceeds without requiring the assessee to lead evidence to justify the quantum of apple yield on the above land. He still further observed that the Assessing officer sought directions from the Addl. CIT u/s 144A. He has referred to non-compliance of such directions by the Assessing officer. Specific details have been given on pages 9-11 of the impugned order about the directions issued by the Ld. Addl. CIT u/s 144A which were not complied with by the Assessing officer. The Ld. CIT also noticed that the Assessing officer did not examine the genuineness of the sale transactions inasmuch as the bills issued by UAA were not proper as the columns of registration number, contract number, truck number, etc. were left blank. Serial number on the bills along with dates were also found to be not in chronological order. These were computer generated bills and the Assessing officer did not make any attempt to ascertain the genuineness of the bills. This aspect has been discus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Addl. Commissioner of Income Tax, Shimla Range, Shimla u/s 144A of the Income Tax, 1961 as discussed in above paras and more particularly to ascertain the quantum of the agriculture apple crop from other major producers of the same areas as well as from Horticulture Department and other relevant agencies regarding per tree yield and rate. 24. In the light of the foregoing discussion, the ld. CIT held the assessment order erroneous and prejudicial to the interests of the Revenue. The same was set aside and the Assessing officer was directed to frame a fresh assessment in accordance with the law, facts and after making due inquiries. The assessee is aggrieved against the findings recorded by the Ld.CIT. 25. The Ld. AR submitted that the Assessing officer conducted proper inquiries in this case. In support of the same, he relied on the notice dated 10.1.2013 issued by the Assessing officer calling for information during the assessment proceedings and the assessee s reply thereto which is available at pages 9-14 of the paper book. He further submitted that the statement of Shri Anand Chauhan was recorded whose copy is available on page 15 of the paper book. He also referr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssing officer to call Virbhadra Singh (HUF) and make necessary inquiries about the transactions concerning Shrikhand Orchards, Damrali, which the Assessing officer did not. He simply accepted the assessee s point of view on all the transactions pertaining to Virbhadra Singh (HUF) without even bothering to take any confirmation from it. ii. The assessee stated before the Assessing officer in his statement, which is available on page 15 of the assessee s paper book, that roughly 80% of the sales were made to UAA and rest of the sales were made to visiting traders. As against that, the assessee had shown sales only to UAA. The AO completely lost sight of the fact that why the remaining 20% sale, as admitted by Shri Anand Chauhan, were not recorded. iii. The Assessing officer failed to note that the bills issued by UAA did not refer to quality of apple, whereas there were wide variations in the sale rates. This can be seen from page 84 of the Departmental paper book which is bill No.3540 dated 12.8.2009 of UAA. There is reference to 310 cases in which rate has been shown as ₹ 900 per box and for another 105 cases, the rate is ₹ 550/- per box. On bill No.1989 dated 19. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll as books of account. This shows that the Assessing officer simply relied on the proceedings for the A.Y. 2009-10 for holding the agricultural income of the current year to be genuine. No verification was made for the transactions of the current year. He further held that sale to UAA was verifiable from sale bills. We have noticed in an earlier para about the veracity of sale bills issued by UAA. These bills were although available with the Assessing officer, but, he did not notice the alarming inconsistencies in them as have been discussed above. vi. In Office note No.2 to the assessment order, the Assessing officer stated that sale of ₹ 89.80 lac was made to visiting traders in addition to sale of ₹ 1.50 crore to UAA. He recorded that: the assessee, however, did not provide details of such visiting traders. Therefore, this information is being passed on to the ACIT, Shimla, for taking necessary action, if any, required in the case of Shri Virbhadra Singh for A.Y. 2009-10 on the basis of this fact. When the Assessing officer himself noticed that cash sale of ₹ 89.80 lac was admitted by the assessee to have been made to visiting traders, it was obligatory on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut whether any of them, i.e. the assessee and the beneficiary is having any bank account at the place of transaction. This point has not been verified by the A.O. c) To ask for details of average production and income per tree in case of other major producers of apple in the same area by issuing commission to ITO, Rampur. No such action has been taken by the A.O. except for relying upon the report of ITO, Rampur recorded by other A.O. during the assessment proceedings of an earlier assessment year i.e. A.Y. 2009- It was specifically directed to inquire the production of other producer and not that of Shrikhand Orchard. It was very important directions from which it could have been ascertained whether Shrikhand Orchard is capable of producing so much apple produce as claimed by the assessee so as to enable him to deposit hefty cash in bank account. When there was specific direction from the Addl. CIT the AO should have complied with the directions. d) To call of information from Horticulture Department and other relevant agencies regarding per tree yield and rate during the relevant period. No reference is made to Horticulture Department and other relevant agencies. e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... called for details of bank accounts maintained with PNB, Sanjauli, Shimla and HDFC and the assessee was required to explain the transactions made in these accounts. The assessee initially did not furnish any details about his PNB account. Thereafter, the assessee, vide his letter dated 21.10.2011 stated that the PNB account was a joint account with his other family members and only the agricultural income of the joint family was deposited in the same. However, vide a later letter dated 22.11.2011, the assessee came out contending that this account was maintained by him as a representative of Virbhadra Singh (HUF) pursuant to an MOU dated 15.6.2008. The Ld. CIT noticed that the Assessing officer did not examine the details of cash deposited in this bank account amounting to ₹ 1.04 crore. Certain other reasons were also recorded by the Ld.CIT requiring the assessee to tender his explanation. After considering the relevant material available before him, he held that the Assessing officer did not make any inquiry to ascertain from where cash was deposited in the bank account and further, no efforts were made to establish the identity of the persons to whom the agricultural produc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in his initial reply dated 12.11.2011 that cash Account belongs to joint family version by giving a copy of MOU submitted that cash deposits are from sale of agriculture produce on behalf of Sh. Virbhadra Singh (HUF). The A.O. accepted the reply of the assessee blindly without verifying the reasons for change of his earlier explanation and further more without even obtaining any confirmation/explanation from Sh. Virbhadra Singh in respect to generation of huge cash in the hands of the assessee which are claimed as the sale proceeds of agriculture produce of Sh. Virbhadra Singh (HUF). ii. The assessee in his reply dated 22.11.2011 claimed that a sum of ₹ 5,00,000/- was deposited in his HDFC bank account by Sh. Sadh Ram Sharma on 20.11.2008 for issuance of LIC policy in the name of Sh. Sadh Ram Sharma, whereas no policy was found by A.O. in the name of Sh. Sadh Ram Sharma a confirmed by Branch Manager of LIC. In spite of wrong claim of the assessee, the assessee order is silent on this issue. No further enquiry seems to have been made by the AO. iii. On one hand, assessee is admitting the fact that as per the terms of MOU, he shall maintain the accounts of sale proceeds ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee managing Shrikhand Orchards, Damrali on behalf of Virbhadra Singh (HUF). We agree with the contention advanced by the Ld. AR that merely because there is no discussion in the assessment order about the relevant issues cannot per se be decisive of non-application of mind by the Assessing officer. However, there should be some material on record to indicate that the Assessing officer did conduct appropriate enquiries and investigated the matter before finalising the assessment albeit without recording the details in the assessment order. The Ld. AR referred to the questionnaire on page 12 of the assessee s paper book which was responded to by the assessee. He also referred to certain enquiry conducted by the Assessing officer about the possibility of the extent of crop that could be raised on Shrikhand Orchards, Damrali. In the light of this material, the Ld. AR contended that the Assessing officer conducted proper inquiry though relevant discussion was not made in the assessment order. 36. In our considered opinion, this is a case of no inquiry conducted by the Assessing officer before finalizing the assessment. We fortify our conclusion with the following reasons :- i. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Assessing officer did not even consider it prudent to ask for confirmation on this issue from Virbhadra Singh (HUF). iii. During the course of assessment proceedings, the assessee submitted that a sum of ₹ 5 lac was deposited in his HDFC bank account on 20.11.2008 by one Shri Sadh Ram Sharma for purchase of LIC policy and he issued a cheque in favour of LIC of India dated 26.11.2008 for issuance of LIC policy in the name of Shri Sadh Ram Sharma. The information received from the Branch Manager, LIC Sanjauli, vide his letter dated 14.12.2011, revealed that no LIC policy in the name of Shri Sadh Ram Sharma was issued against the amount of ₹ 5 lac. The Assessing officer gave a silent burial to this fact and did not deem it necessary to call for the assessee s explanation and make necessary addition. iv. The assessee submitted before the Assessing officer that entries in PNB account were on behalf of Virbhadra Singh (HUF). Sale proceed was deposited in the said bank account and withdrawals were made mainly for investing in LIC policies on behalf of the members of the HUF. First LIC policy was purchased by the assessee on behalf of Virbhadra Singh (HUF) for a sum o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion. This shows that the Assessing officer did not conduct any inquiry about the alleged sale of apple crop made by the assessee on behalf Virbhadra Singh (HUF). The Ld. AR has candidly admitted that the Assessing officer did not enquire from UAA about the amount of sales made to them. 37. The above factors, most of which have been discussed by the Ld.CIT to hold that the Assessing officer blindly accepted the assessee s version and failed to conduct proper inquiry and some other factors to which our attention has been drawn by the Ld. DR supporting the broader issue taken up by the Ld.CIT, amply go to prove that the Assessing officer did not conduct any inquiry on the relevant issues concerning the assessment. In view of the foregoing discussion, we are satisfied that the ld. CIT was wholly justified in setting aside the assessment order which is not only erroneous, but also prejudicial to the interests of the Revenue. 38. The ld. AR also assailed the impugned order by adopting the arguments on the legal propositions made in the case of Virbhadra Singh (HUF), namely, inadequate inquiry by the AO cannot empower the CIT to revise order; debatable issue; and the CIT should hav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 08 for verification. The assessee failed to produce the same till the passing of the assessment order. The Assessing officer launched certain inquiries with the Regional Transport Officer/SDM for ascertaining the veracity of sales shown to UAA. It transpired that some of the vehicles mentioned on behalf of the assessee to have been used for carrying apple crops to Parvano, were either tipper/oil tankers and scooter while other numbers given by the assessee were not allotted to any vehicle as per the record of RTO/SDM. The Assessing officer also conducted enquiries from Subject Matter Specialist, Apple Control Room, Fagu set up for maintaining record of vehicles loaded with applies coming from upper Shimla and adjoining areas, which revealed that certain affidavits filed by the assessee in support of some of the vehicles being used for transporting apples, were wrong. On cross examination by the assessee, it was revealed that the Subject Matter Specialist was not maintaining proper records in respect of all the trucks coming to the Mandi. The AO also conducted inquiry from Horticulture Department for finding out the approximate yield, which could be obtained from 105 bighas of orcha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessment afresh in accordance with the law and the facts as taken note of by him. 40. The ld. AR vehemently argued that unlike for the AYs 2009-10 and 2010-11, the AO carried out complete investigation in the matter and, hence, it could not be said that no enquiry was made by the AO necessitating revision of order. He took us through the assessment order, the summary of which has been recorded in earlier paras. This was countered by ld. DR who also took us through elaborate material to show that the AO erred in making necessary inquiries and drawing incorrect inferences. He, therefore, requested for upholding the impugned order. 41. We have heard the rival submissions and perused the relevant material on record. For this year also, we want to record that Sh. Sudhir Sehgal, the ld. AR raised all the preliminary objections about the scope of evidence, additional evidence and passing of separate order before admission of addition evidence, as were raised in the case of Virbhadra Singh (HUF). For the reasons given in our order passed above in the case of Virbhadra Singh (HUF), such objections are rejected. 42. On merits, it is noticed that though the AO has referred to certain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... traceable from the books of account of UAA. v. The AO though conducted inquiry for comparing the apple crop with other growers of the area and found that the assessee s claimed turnover was several times higher, but he did not proceed further by impliedly accepting the comparable cases supplied by the assessee. In such comparable cases, income was shown at ₹ 31 lac and ₹ 40 lac for the year 2010 against 45 bighas and 40 bighas of land. No evidence was filed in respect of such income stated in their affidavits. Even otherwise, this estimate of income shown by these two parties did not justify the income of ₹ 1.50 crore shown by the assessee from 105 bighas. The AO should have proceeded further instead of closing the chapter there and then. vi. Inquiries from UAA revealed that a sum of ₹ 1.00 crore shown to have been deposited by the assessee in his bank account in May, 2010, was not recorded in their books of account. On inquiry, it was stated that this amount was paid by the agents of buyers. When the AO issued notices u/s 133(6) to the said 13 persons, none of them appeared. The AO simply left the matter to die there without proceeding further. vi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dicates that the agricultural produce was not proved; transportation of the same to UAA was also not proved; bills issued by UAA were not genuine; cash received from UAA shown at ₹ 1.00 crore did not appear in their books of account; the expenses claimed were not backed by any vouchers/bills; and all the expenses were claimed to have been incurred on one single day and that too in cash. We fail to comprehend as to how the assessment order accepting the genuineness of carrying out the agricultural operations and earning a huge income in such circumstances can be considered as an order made after proper inquiry as has been canvassed by the assessee. It is a case of a patent non-application of mind by the AO to the facts, which were loudly calling for in-depth investigation. In our considered opinion, the ld.CIT was fully justified in setting aside the assessment order and directing the AO to frame a fresh assessment. 44. The ld. AR for this year has also assailed the impugned order by adopting the arguments on the legal propositions made in the case of Virbhadra Singh (HUF), namely, inadequate inquiry by the AO cannot empower the CIT to revise order; debatable issue; and the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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